Transcript Slide 1

Omgeo Update
2008 BDUG Conference
Kevin Arthur, Director, Fixed Income Markets
A DTCC Thomson Reuters Company
Agenda
1)
2)
3)
4)
Omgeo Introduction
Current Environment / Trends
Omgeo’s Business Focus
Review of Omgeo products
- ALERT, Central Trade Manager (CTM), OASYS, TradeSuite
5) Municipal Securities
• Low affirmation rate and the industry challenge
• Question: What do Custodians see as impediments to
affirmation of the ID Confirm?
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
About Omgeo
Omgeo is the global standard for efficiency, certainty and
confidence in post-trade, pre-settlement operations.
We create certainty in post-trade operations through providing
automation for timely allocation, matching, confirmation and
affirmation of the economic details of trades between investment
managers, hedge funds, broker/dealers, and custodian banks.
Our established, global community includes:
• 6,000 community members
• 46 countries
• 80 firms in partnership network
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
An established track record
Omgeo Local Offices
• Industry participation
- Jointly owned by DTCC & Thomson
Reuters
- Board of Managers, Advisory Board,
Working Parties (50+ firms represented)
• Regulatory & depository relationships
• Handling over 2.0 million transactions per day
- Will exceed 3 million fixed income
allocations in 2008
• Managing over 2.2 million settlement
instructions on over 330,000 accounts
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BDUG Conference, September 15, 2008 Scottsdale Arizona
Boston
Chicago
Frankfurt
Glasgow
Hong Kong
London
Manila
New York
Paris
San Francisco
Singapore
Seoul
Stockholm
Sydney
Tokyo
Toronto
A DTCC Thomson Reuters Company
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BDUG Conference, September 15, 2008 Scottsdale Arizona
Operational Performance Measurement
A DTCC Thomson Reuters Company
Custody
Depository
Reconciliation
Post-Trade, Pre-Settlement
Settlement of
Securities/Cash
Netting/Clearing
3rd Party Notification
Settlement Enrichment
Trade Affirmation
Matching
Trade
Trade Confirmation
Trade Allocation
Trade Execution
Pre-Trade
Pre-Trade
Trade Order
IM/BD Negotiation
IM-Decision of Trade
Omgeo:
Where do we fit in the trade process?
Omgeo
Settlement
Current Environment / Market Trends
• CDO and Sub-Prime Challenges
• FNMA/FHLMC
• Municipal Securities
• Auction Rate Securities, Concerns about Municipalities, Increased topic on Capitol Hill,
Low affirmations rates
• Mergers
• BNY/Mellon, State Street/ ITG, JPMC/Bear Stearns, BOA/Countrywide, RBS /ABN
• Changes in liquidity sources
• NYSE Euronext, NASDAQ/AMEX, Turquoise, Dark pools, Proliferation of execution
management (EMS) platforms, BATS
• Retail SMA/Wrap/Wealth Mgmt
• Shift in assets from traditional 401k to SMA/UMA
• Outsourcing
• Retail SMA, Institutional, Hedge Funds
• Fixed Income automation slowly catching up to Equities
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Current Environment / Market Trends
• Brazil, Russia, India, China (BRIC)
• Emerging markets, Building out financial services infrastructure, US firms moving to
emerging markets
• Concerns about Derivative automation (Fed)
• OTC, trade processing and confirmation
• Regulatory pressure
• OFAC, SOX, FINRA, SEC, increased Corporate Information Security
• Heightened focus on Operational Risk
• STP and risk management key focus areas
• U.S. on a green path
• Stop the paper…DTCC and Omgeo campaigns
• Customers are looking for full automation of their trading book
• Desire increased transparency, reporting and compliance on a global basis
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Industry Challenge
• What do we need to do as an industry become more efficient?
• How do we deliver progress in today’s environment?
• What are ways to add client value in the trade processing chain?
• How do you differentiate your service offering in the current
environment?
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Omgeo Business Focus
Committed to delivering robust and sustainable solutions for our global
community of clients.
• Continue to connect all market players including buy side, hedge funds,
brokers, prime brokers and custodians into trade processing model for
domestic and global trading activity
• Automate trade processing from front office straight through to settlement
facilities
- Enable seamless interfaces to Omgeo from trading systems and OMS
- Electronic interface from Omgeo to Depositories
• US DTCC, Canada’s CDS, Japan’s JASDEC, Brazil’s CBLC
• US Market
- Enhancements to the electronic ID Confirm with Trade Suite ID 7.1
• Automate and eliminate paper confirms
- OASYS allocation processing
• Continue to expand Fixed Income community
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Omgeo Business Focus Areas
• SSI
- Support broad array of asset classes, allow for ease of access to data, ensure
market practices are followed, validate as many data elements as possible to
ensure accurate population
• Deliver increased asset class coverage:
- Fixed Income
• Repo
• TBA
- Derivatives
• Exchange Traded Derivatives (Futures, Options, Contracts for Difference)
• Derivative Reconciliation
• Collateral Management
- Foreign Exchange (FX)
• New markets:
- Canada, Brazil, India, China
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
ALERT
• Enhancements – Custodian View
- FX SSI – Delivered in Q3 2008
- United States Treasury Office of Foreign Asset Control (OFAC)
Compliance – Q4 2008
• ALERT will prohibit future use of OFAC sanctioned countries in the definition
of settlement instructions
- New Markets/Validations Release – Q1 2009
• Expanded coverage of instruments, depositories and market rules
• Tighter controls on existing instructions to increase data quality
- UI Upgrade: Settlement Instruction (SI) View – Q2 2009
• Improved SI UI page layout to help data quality and client understanding of
the settlement chain
- Expanded Audit Reporting – Q3 2009
• Enhanced audit capabilities & more granular detail into IM activity when
linking to custodian models
- SI Market Rules Scan – Q4 2009
• Assess compliance of custodian models
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Omgeo CTM
• Recent delivered enhancements
- Third party notification
• Allows up to 15 3rd parties to receive SWIFT and CSV files
- CTM Broker
• Allows broker dealers to come onto CTM
• Usage
- July 07: 851,812 allocations
- July 08: 1,650,295 allocations
- July 07: 100,597 SN messages
- July 08: 141,800 SN messages
94% increase YOY;
399% increase since July 06
41% increase YOY
- 350 clients on CTM globally as of August 08 (49% increase YOY)
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
OASYS
• Recent enhancements
- OASYS 5.2 – Delivered to production
• Enhanced Fixed Income, TBA; Enhanced Repo functionality
- OASYS 6.0 – Targeted delivery Q2 2009
• Enhanced Fixed Income, Enhanced commissions management, BIC
codes for Clearing Broker, Upgraded API's (Linux), Pre-note allocation
to Custodian via TradeHub
• Usage
- Daily equity average:
- Daily fixed income average:
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180,000 allocations
15,000 allocations
BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
TradeSuite – ID Confirm
• Enhancements
- TradeSuite 7.0 – ID Net, New Free Format Fields, Reg SHO; Enhanced
Repo functionality
- TradeSuite 7.1 – Elimination of paper confirms
• Usage
- Average daily trades/confirms: 1,510,527
- Daily equity average:
- Daily fixed income average:
1,403,866
106,661
- Confirm/Affirm (TradeSuite):
1,389,302
- Central matching Daily Average 121,225
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Summary of Key TradeSuite Projects
• Paper Elimination - TradeSuite Confirm Backer/Disclosure
- Bond Market Association (SIFMA) – Task Force on Electronic Confirms
• Subsequent interest expressed by equity markets
- TradeSuite Confirm Gap Analysis with Rule 10B-10: add indicative fields,
expand special instructions and enrich confirm from database of “housed
disclosures”
- Omgeo met with SEC and MSRB staff on November 1, 2007 regarding
exemptive relief letter
• SEC approval gained with No Action Letter on March 12,2008
• Access of disclosure URL equals delivery
• Target rollout by Q4, 2008
• Continue to educate community – Ongoing
• TradeSuite Repo
- Automation of trade confirmation messages for repo transactions
- Types to be supported: Tri-Party, DVP/RVP and Buy/Sell Backs
- Delivered on February 23, 2008
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Summary of Key TradeSuite Projects
• ID Net
- Working closely with DTCC to net institutional trades to streamline processing of
growing equity trade volumes
• SWIFT 2008
- Support all mandatory changes dictated by SWIFT
• QC on the Web
- Paper based reports will now be generated on line
• Regulation SHO Phase 2
- For prime broker/ hedge fund enhanced processing
- Phase 2: added 4 new reject reason codes specific to PB transactions to the
Advice of Cancel Correction (AOCC)
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Municipal Affirmation Rate - Industry Challenge
Overview
• Muni affirmation rates at only 66% vs. 89% on noon of T+2
• SIFMA dealers and Muni Operations Group concerned with low affirmation
• MSRB requires affirmation, else dealer required to stop trading with client
• SIFMA and Omgeo investigating reasons for low affirmation
• Not all buy side firms affirm trades and often delegated to custodian /
clearing agent
• SIFMA working with dealer community
• SIFMA and Omgeo engaging buy side firms
Next Steps
• Engage custodians at BDUG – Identify possible obstacles to affirmation
- Breakout session delves into affirmation rates and barriers
• Omgeo / SIFMA to set up discussion meeting with all groups, dealers, buy
side and custodians
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Muni vs. Non-Muni Affirmation Rates
U.S. trade affirmation rates for July 2008
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Non-Muni Trades
Muni Trades
Affirmed trades on T+2, Noon
89%
66%
Un-affirmed trades on T+2, Noon
11%
34%
BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
Lagging Muni Affirmation Rates
What are some of the causes for low affirmation rates?
Please take a moment to share your thoughts on why affirmation rates
are so low and detail any roadblock or impediment
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BDUG Conference, September 15, 2008 Scottsdale Arizona
A DTCC Thomson Reuters Company
A DTCC Thomson Reuters Company